International trade affects most
industries. While some go unnoticed by the general public, some have a large
impact on hundreds of millions of lives every day. International trade law governs
and facilitates the movement of everything—from equipment to medicine, food,
and even water—across national borders. Beer is one such good. While most
people are familiar with the idea of imported beer, fewer have considered
imported ingredients. At its most basic, beer is made from water, yeast, hops,
and malted grain. Beer manufacturers all over the world mix and match the origins of each
ingredient to create new flavors, or recreate a foreign favorite.
Malt, essentially grain that is
ready to be fermented, is arguably the most important
ingredient in beer, influencing everything from taste to alcohol content to
color of the end product. Barley is the most popular grain for malting, but other grains such as wheat, rye, corn, and rice may also be used to make
beer. A country without such grain readily
available instead relies on imports. For that reason, one particular treaty has
been creating a buzz of excitement in the American grain industry – the Trans-Pacific
The Trans-Pacific Partnership (TPP)
provides a long-sought-after connection between the world’s largest exporter of
wheat, the United States, and one of its largest importers, Japan. American producers hope that the new
agreement will revitalize the export market for grains. By lowering trade barriers, the partnership hopes to increase trade between the
signing countries, and create a better trade environment for producers of goods
to be exported. The agreement is a welcome change in the struggling American wheat industry.
Japan has a number of tariffs on
imported goods. Various treaties over the last few decades have attempted to chip away at trade
barriers to better facilitate international trade. In 1994, the World Trade Organization (WTO) was established, and in 1995 both the United States
and Japan joined the global network it created. In the six-year “Uruguay Round,” the WTO created a comprehensive multilateral
agreement dedicated to agriculture. In 2001, the “Doha Round” set broad objectives for trade and market access, and in 2004 frameworks were established to achieve the organization’s agricultural
Ripening barley in the Pacific Northwest. Barley is the primary malting grain for most beer.
Japan already accounts for 66% of U.S. barley exports, and could begin importing even
more if both countries ratify the TPP. (Via Wikimedia Commons)
The Trans-Pacific Partnership
builds on WTO members’ rights and obligations and seeks to improve market
access, eliminate export subsidies, reduce distorting domestic support, sort
out a range of developing-country issues, and even deal with non-trade concerns. In the TPP agreement’s text, the signatories expressly incorporate the General Agreement on Tariffs and Trade (GATT), an agreement incorporated into the WTO.
The Trans-Pacific Partnership has
the makings to be one of the most influential trade partnerships in the world. Signed
in February, the TPP is extensive, covering everything from the trade of
automobiles to services, and the elimination of tariffs. Altogether, the treaty covers about 40% of the world’s economy.
In December, the U.S. Agricultural
Technical Advisory Committee for Trade in Grains, Feed, Oilseeds, and Planting
Seeds released a report on the degree to which the TPP was expected to promote U.S.
economic interests (“Grain Report”). The other parties to the “agreement
represent a large market for U.S. grains. . . , and they will be an even larger
market for these products under the concluded agreement.” The Grain Report examined the partnership’s potential effect on different
grains and grain products, analyzed each by region, and warned that without the
agreement American producers would risk a competitive disadvantage vis-à-vis other
nations with trade agreements. The report included an analysis on multiple grains that could be used for beer
production, focusing on wheat.
The Grain Report suggests the
Partnership could provide more market opportunity for American wheat producers
in trade with Japan in particular. The U.S. grain industry accounts for billions of dollars per year, and wheat alone accounts for millions of dollars. The United States is the world’s largest wheat exporter, despite producing a relatively small
percentage of global wheat. Most American wheat exports go to Japan, “the largest export market . . . ,
valued at $925 million in 2014.” U.S.
exports account for 60% of Japan’s imported wheat.
Despite the already-established
trade connection, American wheat could benefit from reduced trade barriers. The
American wheat trade peaked in 1987/88 when both China and the Soviet Union
were importing large amounts. Thereafter, demand from those two major importers slowed, and the demand from
developing countries was not enough to make up the difference. The export market continued its decline in 2003, when the European Union established
trade barriers for lower-quality wheat. A couple of years thereafter, in 2005/06, the demand increased slightly, but
fell the next year due to high prices. In the last few years, prices of American wheat have reached “unprecedented”
highs. It is difficult to predict the future market for the industry, but profitability has been declining, and fewer acres are being devoted to wheat growth as a result.
The U.S. government argues that the TPP is necessary for the U.S. wheat industry to remain competitive in the
international market. Even though Japan is a major importer of American wheat, trade barriers remain
between the two countries. One such barrier is a “mark-up”; even though
wheat is imported into Japan without a “tariff”, Japan’s Ministry of Agriculture,
Forestry, and Fisheries (MAFF) “assesses a ‘mark-up’ of 17 yen per kilogram
(equivalent to $150 per ton) that is charged to the buyer. . . .” The TPP requires a
revision of this practice, and an eventual phasing-out of such barriers. The TPP requires Japan to establish a new “country-specific quota” for the
United States, which creates exclusive, new opportunities for U.S. suppliers. Because the quota is country-specific, the American producers will enjoy a
relatively low trade barrier. Japan has previously avoided such negotiations for the reduction of tariffs on
wheat. Through the TPP, Japan will lower its mark-ups on wheat by forty-five percent
over the next nine years.
Although much of the focus has been
on American wheat, it remains unclear to what extent repealed Japanese tariffs
will improve that industry. Japan has recently joined a number of other nations rejecting American wheat in an effort to ban genetically modified foods. This is not to say the partnership will not positively impact American grain
producers, or that American wheat will not find its way into Japan. However, the
tides could be turning in favor of another grain that is already quite
popular – barley.
Although barley makes its way into industrial
products and a wide range of foods for both humans and livestock, most barley produced in the United States is a premium-quality product that can be used for malting. Barley is produced and exported on a
smaller scale than wheat, but American production, and Japanese consumption, is
nonetheless substantial. The United States is consistently a top-ten producer
of barley, and exports in large quantities to its fellow signatory of the TPP, Japan. Japan is the world’s third-largest importer of barley; the country consistently imports about eight times the amount of barley it
produces. In 2014, Japanese imports
of American barley were valued at more than $46 million. While this represents only a fraction of the total barley imported by Japan, it accounts for 66% of U.S. barley exports.
While Japan is better known for its sake, or rice wine, beer has become its alcoholic
beverage of choice in the last generation, particularly at ramen-noodle shops and pubs
like the one shown here. (Via Wikimedia Commons)
The Trans-Pacific Partnership can provide
American producers more opportunity in barley production and export. The
partnership would, as with wheat, break down trade barriers, and would also help
to facilitate expansion.
The Japanese Beer Market
One reason for Japan’s strong demand
for barley is the fairly young, but thriving micro-beer industry. Since the
mid-1990s, Japan has been a leader in the East Asian craft-beer scene, and is now the seventh-largest beer
producer in the world. It is also the third-most profitable beer market in the world. Beer has become Japan’s most popular drink in the last generation, and the island nation boasts more
than 200 microbreweries.
The Japanese beer industry actually
began in 1853. However, in 1908, Japanese tax laws required that breweries produce a minimum
of 180Kl, excluding micro-producers. The minimum was reduced to 60Kl in 1994, allowing smaller manufacturers to finally
enter the market. Japan immediately started to see small-scale breweries, though not all produced
good-quality brews. As craft beer grew in popularity, brewers started looking to American beer for inspiration. There are multiple Japanese brewers who trained in the U.S.,  and one of the most well-known and highly-respected microbreweries, Baird
Brewing Company, was founded by an American. It is significant that American craft beers are inspiring their Japanese
counter-parts, because American craft beer uses a lot of malt. In the U.S., the average amount of malt per barrel of craft beer is 68.7
pounds, about four times the amount of malt used in non-craft beer. Japanese microbreweries also probably use more malt per barrel than the
non-craft producers due to the styles of beer produced.
Thus the growing Japanese
micro-beer industry depends on imports. Brewers are notorious for keeping their
brew recipes close to their flannel cuffs, and for good reason – the recipes are
what make their beer unique and marketable. However, brewers do use imported
grains. The industry is helped by the Japanese stance on beer imports. Japan classifies
beer differently than some other countries, and does not consider varieties
with such little malt in them as some European brews to qualify as beer. While Japan is free to enter into outside agreements with the European Union to
alter its stance, the Trans-Pacific Partnership has no bearing on the matter. The
partnership will, however, foster the trade of Japanese beers, and aid in the
continuing growth of the market.
American producers of barley and
other grains are now in a great position to grow within the Japanese beer
market. The elimination of tariffs through the partnership will probably help
keep the price of barley manageable for small breweries, and will provide more
opportunities to American producers to sell their barley and malt through the
existing and profitable trade channel.
(last visited Feb. 1, 2016). Malt is made by allowing grains to germinate,
which converts starches, complex carbohydrates, to various sugars, which are
simpler carbohydrates. The Brewing
Process, Sint-Sebastiaan Belgian Microbrewery, http://www.sterkensbrew.be/sbm/beer_making.html [perma.cc/2EAL-V86B].
The sugar is what ferments in the beer-making process. Beermaking, supra note 1.
The Brewing Process, supra note 2 (noting that the degree to
which the grains are roasted also affect beer’s flavor and color beer).
The Brewing Process, supra note 2. Corn and rice are
non-malted grains. Id. Corn and rice
are sometimes used as “adjuncts,” a way to adjust the feel and taste of the end
product. See Using Adjuncts in Beer, More Beer, https://www.morebeer.com/articles/brewing_with_adjuncts [perma.cc/6XKG-52JX]
(last visited Feb. 1, 2016) (providing information on different grains used to
make beer). Adjuncts can be malted or unmalted, the difference being whether
the adjunct contains enzymes. See Adjuncts Explained, https://byo.com/mead/item/94-adjuncts-explained [https://perma.cc/TL35-APWY].
Enzymes help to break down the starch in the grain. Id. Corn and rice lack such enzymes, but can be used with malted
grains, such as barley, that have a surplus of enzymes. Id.
See Trans-Pacific Partnership, Annex
1-A, available at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text [perma.cc/V5UF-KNU6]
(listing the parties to the partnership as the United States, Japan, Australia,
Canada, Malaysia, Mexico, Peru, Vietnam, Chile, Brunei, Singapore, and New
Zealand). The United States has not yet ratified the treaty as of Feb. 13,
See Trans-Pacific Partnership, supra note 7.
See id. at Annex 2-D.
Partnership, supra note 7, Preamble.
See id. art. 2.3(1) (“Each Party shall
accord national treatment to the goods of the other Parties in accordance with
Article III of GATT 1994. . . .”).
See generally Trans-Pacific Partnership, supra note 7 (explaining treaty’s
 Grain Report, supra note 10.
Id. at 2.
U.S. Wheat Trade, U.S. Dep’t Ag. Econ. Res. Serv., http://www.ers.usda.gov/topics/crops/wheat/trade.aspx [perma.cc/N47E-35PY]
(last viewed Feb. 1, 2016) (“While a handful of nations dominate wheat exports,
there are many wheat-importing countries. A few countries account for a large
share of world wheat imports, including the EU-27, Japan, South Korea, and Brazil.
However, most wheat is imported by developing countries with limited production
potential. Population growth in Egypt, Algeria, Iraq, Brazil, Mexico,
Indonesia, Nigeria, and other developing countries will be the basis of future
expansion of world wheat trade.”).
Id. (noting that “the United States
produces only 10 percent of world wheat (1993/94-2007/08 average)).
Grain Report, supra note 10, at 8.
U.S. Wheat Trade, supra note 30.
USDA Wheat Baseline, supra note 29.
Id. (“Long-term projections for U.S.
wheat for 2015/16-2024/25 are heavily influenced by prospects for increased
foreign competition in global markets and expectations for continued slow domestic
yield gains. Both factors contribute to lower profitability for wheat than for
other domestic crops. . . .”).
Trans-Pacific Partnership Benefits to U.S.
Agriculture, supra note 32.
See Trans-Pacific Partnership, supra note 7,
Annex 2-D: Tariff Commitments.
Trans-Pacific Partnership Benefits to U.S.
Agriculture, supra note 32
(“Japan currently imports wheat via a state-administered, 5.7-million-ton World
Trade Organization (WTO) tariff-rate quota (TRQ). . . .” However, under the
TPP, “Japan will establish a new 114,000-ton, country-specific quota (CSQ) for
U.S. wheat that grows to 150,000 tons in seven years.”).
Grain Report, supra note 10, at 5.
 Recently, for
instance, it is estimated that Japan produced 182 MT of barley in 2013, and 170
MT in both 2014 and 2015. Japan Barley
Production by Year, Index Mundi (last viewed Feb. 6, 2016), http://www.indexmundi.com/agriculture/?country=jp&commodity=barley&graph=production [perma.cc/L7R6-HQ3A].
Meanwhile, Japan consumed 1450 MT, 1300 MT, and 1450 MT, respectively for those
years. Japan Barley Domestic Consumption
by Year, index mundi (Feb. 6,
2016), http://www.indexmundi.com/agriculture/?country=jp&commodity=barley&graph=domestic-consumption [perma.cc/5QA4-47H9].
Grain Report, supra note 10, at 5.
also 5 Most Common Teas in Japan, Wasabi (Nov. 20, 2015), http://wasa-bi.com/topics/751 [https://perma.cc/U9WT-ZGZ9]
(including mugicha, a non-fermented barley beverage served cold, along with
oolong tea and three types of green tea).
Barley – Production and Exports, supra note 50 (referencing the twelve-month period ending May 31, 2015).
Id. The minimum amount was increased to
1,800 Kl in the 1940s, and then to 2,000 Kl in the 1950s. Id.
See id.; see also
The 10 Best Craft Breweries in Japan, supra note 57 (noting that Yo-Ho Brewing, in Nagano, was also
inspired by the American beer scene).
See The past—and future—of Japanese craft
beer, supra note 65.
Japanese brewing companies mostly produce beer in the German style, which uses
less barley. See The past-and future-of
Japanese craft beer, supra note 65; see also Adjuncts Explained, supra note
5 (noting the malt in some German beers can be 75% wheat).
Japanese Beer, supra note 60.
Posted by Kathleen M. Cusack (Katie) on Thu. February 18, 2016 2:05 AM
Food and agriculture, Free Trade, Japan, Reports (longer, analytical blog posts), United States